French President François Hollande says, "What you need to understand ... is that the crisis in Europe is over." (Euro crisis is over, says France's Francois Hollande BBC News 06/09/2013)
The guy is tripping. As in psychedelic drugs tripping.
If he defines the "euro crisis" narrowly as speculative attacks on individual countries' debt, then the mid-2012 decision of the ECB to backstop national debt against speculative attacks (which they had to use a creative interpretation of their legal authority to do) has held off those kind of speculative attacks.
But unless Germany agrees to stimulate their economy and run higher inflation to pull the southern European euro countries out of depression, the actual crisis will go on for a while. If there actually is an orderly way to unwind the euro currency, the whole eurozone should be at least designing plans for it. Maybe they are in secret, which would mean in that way they're showing more leadership responsibility than they have at any other point since 2008, when the depression started there.
More likely, there is no orderly way to unwind the currency zone. So when one country bails, several others will quickly follow. Germany's exports will rise in price by about 30% according to current estimates as the new D-Mark or a revised euro goes into effect and it will hammer Germany's economy. (Austria's too). And then the "Target 2" problem kicks in, with the several hundred billion euros in euro-linked currency-clearing assets on the Bundesbank's books going up in smoke and will have to be recapitalized.
That BBC article makes it sound like the banking union is a done deal, which isn't close to the case. Merkel is dragging her feet because she doesn't want it, certainly not before September's elections and not at all if she can avoid it. Sometime around September-October, there is also somehow on the eurozone's agenda recapitalizing a number of large eurozone banks, some of which would very likely be underwater if their assets were valued accurately (economists call those "zombie banks," which has been a big problem for Japan the last 20 years).
I discussed Recapitalizing European banks 06/06/2013 here last week. I'm sure Merkel and Hollande and Cameron will handle it with the same level of high competence and responsibility they've been showing since the Greek crisis broke in 2009.
Hollande is dancing around trying to sound positive because he's getting heat from his own party for being an austerity freak just like Merkel wants them all to be. But it's mostly hot air. He's completely on board with Angie's punish-the-inferior-nations austerity program. He's also committed to raising the French retirement age from 65 to 67, another of Angie's goals for the whole EU.
Tags: angela merkel, austerity economics, eu, euro, european union, france,